While revenue growth can be intoxicating, empire building dressed as “scaling” often implodes when senior leaders ignore or underestimate customer risk.
Trailblazer Nvidia might very well be on that path.
Its customer, Super Micro (SMCI), returned to the headlines this month when the Department of Justice indicted co-founder and board member Wally Liaw and two associates for allegedly conspiring to illegally divert AI servers to China.
In 2024 and 2025, an Asian intermediary purchased approximately $2.5 billion of SMCI servers — many assembled in the US — which were then repackaged in unmarked boxes and shipped to Chinese end users. To trick regulators and compliance staff, the defendants staged thousands of manually relabeled dummy servers — several with serial numbers removed with hair dryers.
The Wall Street Journal’s Dan Gallagher astutely argued that SMCI’s fate effectively rests with its chipmaker Nvidia. That’s technically true from a supply chain perspective, but a flipped question’s better. Can Nvidia’s reputation, growth aims and on-again-off-again, export-controls dance bear such a distraction?
Well-compensated boards rarely judge revenue sources, but there are three reasons CEO Jensen Huang and his Nvidia directors must act decisively — and swiftly.
No Remorse
Here’s what “polite” revenue forecasting often misses entirely.
1. Nvidia Needs Its Export Licenses More Than SMCI’s Business.
Nvidia’s AI dominance does not hinge on SMCI. Dell and other server vendors are viable options. Nvidia can redirect allocations and maintain its trajectory.
The much smaller SMCI revenue model runs on Nvidia components, not the other way around. That asymmetry alone should make the decision straightforward.
What Nvidia cannot easily recover is the reputational and regulatory cost of being the chip supplier at the center of a national security export control scandal. Understandably, its board faces a quandary as geopolitical tensions unpredictably change export limits. If further investigation reveals the SMCI compliance failures were systemic, the Feds could outright halt export-controlled tech shipments.
2. SMCI’s Misconduct Appears To Be A Design Feature.
The latest indictment fits a longstanding pattern that surfaced long before the AI boom. In 2020, the SEC charged Super Micro with widespread accounting violations including over $200 million in improper revenue recognition via channel stuffing spanning back to 2014. The company settled for $17.5 million. While the CEO was not charged with misconduct, he was “required to reimburse the company $2.1 million in stock profits” as clawbacks. Within months of that resolution, SMCI rehired accused senior executives, including Liaw who rejoined the board.
Blame was pinned on then-CFO Howard Hideshima. Intriguingly, Hideshima soon found work as a consultant with Ablecom, a company heavily owned (35% in 2025) by Steve Liang, the brother of SMCI CEO Charles Liang. Charles Liang and his wife Sara Liu (SMCI officer and board member) also jointly own over 10% of Ablecom.
In October 2018, Charles Liang, personally borrowed approximately $12.9 million from Chien-Tsun Chang, the spouse of Steve Liang. The loan is unsecured with no maturity date and bears near-zero interest. As of 2025, the amount now due on the related-party loan was approximately $17 million.
Bill, a third Liang brother, is the CEO, board chair and key shareholder of Compuware. In addition, a sibling of recently-arrested Liaw owns approximately 11.7% of Ablecom’s capital stock and 8.7% of Compuware’s capital stock.
In February 2022, Hudson Labs, using finance-specific large language models processing over 800,000 SEC filings annually, unearthed some other intriguing relationships across three companies – SMCI, Ablecom and Compuware.
Compuware acts as both a SMCI distributor and manufacturer. Further, Ablecom often sold components back to SMCI at the same price Ablecom buys them, which raises questions about transaction value. SMCI characterizes Compuware is a nonexclusive authorized distributor of products in Taiwan and China, in addition to acting as a sales representative on certain Asia transactions.
Third Creek Advisors founder Adam J. Epstein spotlighted the perils of private companies that “look and feel to institutional investors like ‘real public companies,’ while others are much more like ‘private companies with ticker symbols’ or PCWTS.” Ablecom and Compuware are private companies in Taiwan. SMCI’s web fits the definition of a PCWTS — or maybe a family business with a ticker symbol.
3. SMCI’s Red Flags Hide In Plain View.
The notion that Nvidia couldn’t have known about SMCI’s risk is quite unlikely.
As discussed on Forbes in “AI Spotted Super Micro Risks Two Years Before Filing Fiasco” in August 2024, Hudson Labs flagged SMCI’s related-party transactions as “top 100” high risk as early as 2022, scored with its propriety quantification tool. In 2024, Hindenburg Research also published a short report alleging fresh accounting manipulation, undisclosed related-party transactions and export violations tied to Russia. SMCI’s stocked plunged 30% and its auditor EY resigned.
If an AI tool running on public filings could surface those risks in 2022, Nvidia’s supplier risk function — at a company with a market cap now over $4 trillion and the most strategically sensitive chip portfolio — had the resources, if not the motivation, to reach the same conclusion. Did Nvidia’s revenue and valuation surges fuel incentives to retain a major customer? Did the board ever ask?
SMCI’s FY2026 revenue projection sits at $40 billion, with a backlog of over $13 billion with Nvidia. That book of business carries a hefty national security price tag.
Shortest Straw
The pattern of accounting fraud, SEC settlements, rehired offenders, auditor resignation and export violations reflect, at best, a poor governance attitude that treats laws and compliance rules as revenue target speed bumps. That’s SMCI.
So will Nvidia’s board bask in the glow of record share growth and personal wealth accumulation or address real concerns that can engulf its sales forecast, cash flow and strategic future? Someone will make the choice — whether in Santa Clara or Washington, DC. Whose move now?
